Florida Gov. Charlie Crist has vetoed a measure that would have permitted some insurers to charge unregulated property rates, stating that it would allow them to essentially "redline" areas of the state.

The governor said that HB 1171, the "Consumer Choice" bill–permitting unregulated rates for carriers that have a surplus of at least $200 million and a ratio of net written premium to surplus of no more than two-to-one–would hurt emerging Florida domestic companies.

His decision angered insurance industry interests, but drew praise from a consumer group.

Florida Insurance Commissioner Kevin McCarty had urged the governor to veto the bill, drawing anger from the bill's sponsor, State Senator Michael S. Bennett, R-Bradenton.

Sen. Bennett claimed Mr. McCarty had made assurances he would not oppose the bill before writing a letter to Gov. Crist asking for the veto.

In his veto message, Gov. Crist said rates have remained relatively stable since passage in January of a bill which lowered rates by 15.9 percent.

The measure he vetoed would reverse that, he argued, by allowing certain insurers to charge excessive rates at a time when people cannot afford to pay them.

He also said the state has added new insurance companies and "a significant amount of new capital" since 2006, and the bill, he added, would "disrupt the effort to build an increasingly competitive insurance marketplace…."

Insurance company trade associations argued the market would be more competitive, with consumers having the choice to insure with companies charging either regulated or unregulated rates.

But Gov. Crist said the select few insurers that could charge unregulated rates would simply pass on bad risks to non-qualifying competitors and Citizens Property Insurance Corp., the state's insurer of last resort.

"Commissioner McCarty knows that Gov. Crist carefully considered this bill and has done what is best for the people of Florida," Mr. McCarty's office said in a statement.

The American Insurance Association expressed dissatisfaction with the veto.

"AIA believes the governor's veto is an opportunity lost for Florida–an opportunity to provide a modest, market-based alternative to Florida's overregulated property insurance market that has been in short supply in recent years," said Cecil Pearce, AIA Southeast region vice president.

In addition, Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies, said that "NAMIC has been working for regulatory modernization, including freedom from rate regulation, in the states for nearly 10 years. Competition, rather than heavy-handed state control, is the best regulator of the markets."

Ms. Reynolds, noting that "Florida is often cited as Exhibit A in the call from some to create a federal insurance regulator," said that "Gov. Crist could have altered that perception. Instead, he chose to continue his misguided policies that harm consumers."

"It is unfortunate and somewhat surprising that the governor vetoed HB 1171 considering the groundswell of support from Florida consumers, who expressed their desire for marketplace choice," she said.

"NAMIC would have preferred that this bill be applied to all insurers, but it was a potential first step to improve the market in Florida," she added. "NAMIC calls on the legislature to revisit this legislation, but to amend it to apply to all insurers doing business in Florida."

However, J. Robert Hunter, director of insurance for the Consumer Federation of America, supported the veto.

"This legislation would have let insurance companies raise home insurance prices at will in Florida's uncompetitive insurance marketplace," he said, adding that the bill "was an invitation to insurers to game the Florida regulatory system and abuse consumers."

"No insurance rates could have been found to be too high, no form of discrimination could be found to be unfair if a policy is issued under the terms allowed by the legislation," he charged.

Eli Lehrer, director of the Center for Risk, Regulation and Markets, part of the Competitive Enterprise Institute–a conservative think tank–attacked the veto, saying it will likely leave State Farm Insurance with no choice but to continue its withdrawal from Florida.

"I wouldn't be surprised at all if other insurers follow," he said in a statement. "I can't see why any insurer of any size will want to do any business in Florida. And, one way or another, Floridians are going to pay the price."

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Florida Governor Vetoes Deregulation Of Some Property Insurance Policy Rates

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